Digitisation: who said it would be easy?

Supply chain digitisation is the goal for many organisations today, but two new studies highlight some of the challenges ahead.

A study from the Capgemini Research Institute “The digital supply chain’s missing link: focus”, has identified a clear gap between expectations of what supply chain digitisation can deliver, and the reality of what companies are currently achieving.

Malory Davies, FCILT, Editor.

And a report from JDA Software and WMG, at the University of Warwick has found that most European manufacturers are only at the early stages of their digital supply chain journey.

Capgemini found that half of the organisation surveyed consider supply chain digitisation to be one of their top three corporate priorities, most are still struggling to get projects beyond the testing stage (86 per cent).

It found that 77 per cent of companies said their supply chain investments were driven by the desire for cost savings, with increasing revenues (56 per cent) and supporting new business models (53 per cent) also frequently cited.

Organisation, especially in the UK (58 per cent), Italy (56 per cent), The Netherlands (54 per cent) and Germany (53 per cent) have supply chain digitisation as one of their top priorities.

Nevertheless, Capgemini found that most organisation have spread their investments too thinly and are struggling to scale pilot initiatives.

The organisations surveyed have an average of 29 digital supply chain projects at the ideation, proof-of-concept or pilot stage, but just 14 per cent have succeeded in scaling even one of their initiatives to multi-site or full-scale deployment. For those that have achieved scale, 94 per cent report that these efforts have led directly to an uplift in revenue.

The evidence from those who have moved to implementation suggests that companies are taking on too much, and not focusing enough on strategic priorities. The organisation who successfully scaled initiatives had an average of six projects at proof-of-concept stage while those who failed to scale averaged 11 projects.

And Dharmendra Patwardhan, head of the digital supply chain practice for business services at Capgemini, argues that it will only be achieved by “rationalising current investments, progressing on those that can be shown to drive returns, and involving suppliers and distributors in the process of change”.

JDA/WMG’s ‘Delivering the Digital Dividend’ report benchmarked the digital supply chain readiness of 179 European manufacturers, revealing that only 13 per cent currently have a ‘prescriptive’ supply chain (categorised as Level 3, out of a scale of 1-4, with 4 being a self-learning autonomous supply chain). However, the report suggests that manufacturers are keen to transform their supply chains digitally, with 31 per cent predicting they will have a prescriptive supply chain in place by 2023.

The report found sales & operations planning was rated as having the lowest level of maturity (34 per cent) of the 11 key supply chain processes manufacturers were asked about. Only 21 per cent of manufacturers have the ambition to use S&OP to support end-to-end business optimisation by 2023, and 22 per cent said the same for supply chain optimisation. “This indicates that manufacturers should continue to focus on evolving from S&OP to Integrated Business Planning (IBP), as strong processes will underpin digital agility.”

Hans-Georg Kaltenbrunner, vice president manufacturing industry strategy, EMEA at JDA, says that if manufacturers “put themselves in a position to better exploit their data, they will be able to evolve supply chains from ‘one-size-fits-all’ to a market segment size of one. Now is the time to begin experimenting with technologies such as AI and Machine Learning.”

Clearly, these two studies highlight the fact that there is a lot of work to do on supply chain digitisation, both in identifying the where it can have the most benefit and developing a methodology for successful implementation. But then, who said digitisation would be easy?